Is a ZERO PERCENT 15-Year loan possible? YES!

By
Real Estate Agent with Rodeo Realty ~ Fine Estates Westlake Village DRE #01744774

I've read a few articles recently about a new 15 year loan offered on a limited basis by the Neighborhood Assistance Corporation of America (NACA).  It is designed for low to moderate income buyers and it's purpose is to offer an alternative to the traditional or FHA 30-year fixed loan.

Traditional loans with 30 year terms can offer affordable payments, however it takes a long time to build any equity, as the majority of the early payments go to interest instead of principal. According to Economist Edward Pinto, "So in effect you're mostly just paying rent to the bank, while the bank really owns the house." (Click on the quote to read the NPR article.)

The new 15-year wealth-builder is only offered on a very limited basis and the price of the home must be uner $400,000 in higher priced areas, and $200,000 in lower priced areas.

However it works like this:

1. Low to moderate income restrictions

2. No down payment required, No closing costs, No points or fees (how they do this is beyond me! But here is the NACA article detailing it.)

3. No minimum credit rating required

4. Rate is 3/4 point BELOW FHA 30 year fixed. The buyer can then utilize their cash to "buy-down" the rate, all the way to ZERO!

What's the advantage? Homeowners build equity quickly, achieving their 20% they would have put down in a short amount of time, with the low or zero interest rate.

What's the disadvantage? According to a New York Times article, this is "not a silver bullet" for buyers or the industry. The payments are going to be still too high for the majority of low to moderate income families.

Plus, Bank of America AND Citicorp are subsidizing the program, burning through their court-ordered obligations under the 1977 Community Reinvestment Act. It's possible this program could just get started, then the rug is pulled out and the American Dream is back to square one. 

If you are interested in learning more, here are a few articles you can dig into. In the meantime, I'm going to ask my mortgage broker about it. Unfortunately, in the southern California communities I work in, we rarely sell a home priced under $400,000. But for some agents in lower priced areas, this may be a GREAT way to get your otherwise "not-ready" buyers into a home before prices really start to rise!

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Links for more information:

https://www.naca.com/nacaweb/purchase/purchaseProgram.aspx

http://www.latimes.com/business/realestate/la-fi-equity-building-mortgage-20150103-story.html#page=1

http://www.npr.org/2014/10/03/353521437/new-15-year-mortgage-may-open-homeownership-door-for-more-buyers

http://www.wsj.com/articles/william-m-isaac-and-edward-pinto-creating-more-homeowners-without-building-a-crisis-1412292849

http://www.wsj.com/articles/william-m-isaac-and-edward-pinto-creating-more-homeowners-without-building-a-crisis-1412292849

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For friendly service and the best real estate experience you've ever had,

contact Kathy Smiley

Berkshire Hathaway HomeServices

"Luxury Collection designated agent"

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Robert Vegas Bob Swetz
Realty ONE Group - Las Vegas, NV
Las Vegas Henderson Homes for Sale

Hello Kathy ... VB would be very interested in a zero% 15 year loan! How far is your office from Monterey or Carmel-By-The Sea? 

Jan 08, 2015 05:03 AM #1
Rainmaker
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Kathy Smiley
Rodeo Realty ~ Fine Estates Westlake Village - Westlake Village, CA
Westlake Village, CA - "Making YOU Smile!"

Hi Bob. The Conejo Valley is in southern Cali, between Santa Barbara and Los Angeles along the 101 Ventura Freeway. So not close to Monterey or Carmel. We live in a little slice of paradise, though!

Jan 08, 2015 08:36 AM #2
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John Meussner
Mason-McDuffie Mortgage, Conventional Loans, Jumbo Loans, FHA, 203(k), USDA, VA, - Walnut Creek, CA
#MortgageMadeEasy Walnut Creek, CA 484-680-4852

I love 15 year loans vs the traditional 30.  15 at 0%?  Even better!  Many of these programs are fantastic, but often few people fit into the "bucket" of guidelines.

Feb 23, 2015 08:05 AM #3
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Kathy Smiley

Westlake Village, CA - "Making YOU Smile!"
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